likelihood that the rest of the world will look to us for leadership and we've got to be ready for that. so i'm hopeful this hearing will help inform not on this committee but others of patterns developing and help us to see where we could act, woor we should act and where the best investments for our very limited federal resources might be. i look forward to hearing from each of you this morning and the discussion that will follow. >> dr. gruenspecht, time the time in you need to summarize your annual report, your outlook and we'll hear from ambassador jones. >> thank you mr. chairman and members of the committee. i appreciate the opportunity to appear before you today. the energy information administration is the statistical and analytical agency within the department of energy. eia does not promote or take positions on policy issues and has independence with respect to the information and analysis we

provide. therefore our views should not be construed as representing those of the department or other federal agencies. >> starting with the short-term outlook, eia expects the global market will rely on both increases in production of crude oil and non-crude liquids and a draw on inventories to meet world demand growth this year. the price of west texas intermediate crude oil is forecast to average about $100 per barrel in 2012, roughly $5 above last year's level. uncertainty, such as surprises in economic growth or geeio political issues affecting middle east fliers that were mentioned in the opening statements could push prices higher or lower than projected. the market believes that there is about a one in eight chance that the average wti price in

june 2012 will exceed $125 per barrel and about a 1 in 25 chance it would exceed $140 per barrel. on a related matter to geopolitical issues, eia is working diligently to meet the february 29th deadline to submit to congress a report on the availability and price of petroleum and petroleum products produced in countries other than iran as required under the national defense authorization act. this is a report that we are to prepare every 60 days. the first one is due february 29th. >> turning to consumer prices and, pend turs. ia has lowered its forecast of average household heating expenditures this winter due to warmer weather. our baseline forecast for average gasoline prices in 2012 is slightly below last year's level, about a nick ale gallon.

although recent options and futures price data imply that the market believes there is about a one in five chance that the u.s. average pump price of regular gasoline will exceed $4 in june of this year. the idling of three refineries orrin east coast could have an impact on regional prices, especially as the market transitions to new sflie sources. it's another issue that we are watching closely and i know there's a lot of interest in congress. i will now turn to the longer term projections from our new annual energy outlook. the reference case represents an energy future reflecting current market and technology trends, current consumer behavior and existing laws and regulations. eia recognizes projections of energy markets short term or long term are highly uncertain and cases addressing a variety of alternative market,

technology and policy scenarios will be released this spring. in the new reference case, increased domestic oil, natural gas and renewable energy production coupled with energy efficiency improvements reduces u.s. reliance on imported energy sources. in the outlook domestic crude oil production is expected to grow by more than 20% over the coming decade. again, alluded to in the opening statements. net petroleum imports as a share of total u.s. like wid fuels consumed dropped from 49% in 2010 and they had been as high as 60% in recent years, to 36% in 2035. i should note that proposed fuel economy sand ard covering model years 2017 through 2025 are not included in the reference case and would further reduce projected liquid fuels and net petroleum imports.

u.s. production of natural gas is projected to exceed consumption early in the next decade. we expect reliance on renewable energy and natural gas for electric power generation to rise and putting all of this together total u.s. energy related carbon dioxide emissions are more than 7% below their 2005 level, 2005 level of something that policy makers look at often in 2020 and remain below their 2005 level through 2035. shifting to the outlook for global energy use, our latest international reference case projects world wide information consumption growing about 53% by 2035 with china and india accounting for half of the increase. while fossil fuels continue to

dominate, renewable energy is projected to be the fastest growing sourt of primary energy. natural gas has the fastes growth rate among the fossil fuels and developing countries really dominate the growth in all categories of energy use. there are both similarities and differences in the international energy outlooks developed by the eia and the iea, my colleague here. starting with similarities in both eia's reference case and iea's current policy scenario to which it's most directly comparable, world liquid production reached similar levels over the next 25 years and developing countries account for the vast majority of the growth in global energy growth. turns to differences the iea projects the opec supplies would increase to 50% by 2035.

nd similar price assumptions, iea anticipate the opec narkt share would remain near its current level of about 42% and conventional and unconventional oil production outside of opec will continue to increase and a big wild card is certainly what happens with tight oil or shale oil as it's called. will that become a world wide phenomenon. also the gap between projected u.s. natural gas prices and the latest eia and iea outlooks has narrowed as the iea has cut its price adjustment for the u.s. market over the last several years but its import prices are still more than 40% above e ima's reference case priced. at the end of the projection, our -- this concludes my

testimony. i would be happy to answer any questions you might have. >> thank you very much. ambassador jones, go right ahead. on the other hand we think that non-opec oil supply and opec gas liquids, which are not subject to production restraints will bound by as much as 1.6 million barrels per day combined. at current opec production levels, this would imply some slack in the market and recovery in world oil stocks, which are well below five-year averages after near a year of steady decline. however, it appears more likely

that opec producers will trim supply by around half a million barrels per day to produce at 30 million barrel per day. this would hold inventory levels roughly where they are now, which, as i said, pretty short supply. although huge uncertainty surrounds the ability of non-opec supplied to rebound from the awful year it suffered in 2011, a lot of unplanned outages, me and many of our analytical peers believe it can. higher oil prices have put some expansion projects elsewhere back on track the application of shale technology has transformed u.s. upstream oil prospects as the doctor said. light tight oil alone could grow by 250,000 barrels her day to reach 870,000 barrels per day in 2012. increased supply from the united states, canadian oil stands and

deep water output accounts for much of the growth we see in 2011 with russia, biofuels and natural gas liquids making significant contributions. while there are of course down side risks to this forecast of non-opec supply growth, oil demand might also fall short of our expectations. recently announced revisions to the imtf world's outlook pos it's gobld gdp growth at 3.4% compared to previous forecasts at 3.9%. arguably down side risks for demand and non-opec supply might balance each other so. opec may well try to navigate through 2012 pref duesing at or around 30 gallons per day. now this estimate of spare capacity will come under scrutiny as another looming

supplyside issue for 2012 unfolds. i'm speaking of iran. the recently nanced sanctions on entities having fings dealings with the iranian central bank and the new european union embargo on oil imports from iran will clearly affect the meks of crude supply available on a regional basis, even if absolute levels of global crude supply may be impacted to a lesser gree agree. iran personally exports around 2.5 million barrels a day of crude oil with 65% going to asia and 30% into europe, mostly to refiners around the mediterranean. a significant portion of the 1.3 million barrels per day of iranian crude imported by iea countries, which include some countries in asia like japan and korea, anyway, increasing a significant portion is likely to be affected by these measures, even if refiners will have until

june or july to source alternative barrels, most are already looking for incremental supplies from outside iran, which is exactly the intent of the sanctions. in terms of crude quality, buyers are likely to seek extra barrels from saudi arabia, russia or iraq to make up for lost sales from iran. saudi arabia has publicly reassured customers it will meet their requirement, analysts raised questions over the kingdom's spare capacity, the pro torgs of arab medium and the kingdom's logical -- logistical flexibility to reorient its exports to european refiners. ultimately refiners denied the ability to import iranian oil will most likely find the extra barrels they need but it's perhaps at higher prices than might otherwise have been the

iranian authorities have threatened to institute an embargo and restrict trade through the strait of hormuz to a degree some factors have been factored into market prices. the likelihood of a hormuz blockage seems fairly low. this suggests all of those eke seeking a more tranquil market in 2012 will be disappointed. the agency will remain vigilant and stands ready to act rapidly and decisively in f a major

disruption occurs. thank you, mr. chairman. >> thank you very much. mr. burkehard, go right ahead. >> mr. chairman, senator murkowski, other members of the committee. thank you for the opportunity to share some thoughts with you today. mr. chairman, as you mentioned, 2011 was quite turbulent in the oil market because of the lebian civil war, eurozone crisis, raund the slowing global economy. at the same time in 2011 we saw the highest annual oil price ever an annual average basis. butt energy story is not just limited to high prices and geopolitical concerns. that's very important. i'll talk about those in a little bit. but the energy story in the united states is also about creating jobs and economic growth and more domestic supply. one of the most significant stories or developments in energy markets in recent years has been what we call the great rerifle. the great revival in u.s. oil

production. the long decline in u.s. production was never supposed to end but it has come to an end and between 2008 and 2011 over that three-year period, u.s. liquids pro, did yous so that he crude oil, natural gas, liquids, some biofuels, u.s. liquids production grou by 1.3 balance barrels per day, the biggestin crease during that time by any country in the world. the number two source of growth was russia, which grew by about 500,000 barrels per day. north dakota is an important part of this story. today north dakota produces about as much as ecuador. ek what door is a member of oaf peck. i don't want to suggest north dakota is going to join opec but it gives you a sense of how big the increase has been. looking out over the next decade, when we look at the

potential for the u.s. and canada combined, we see the potential for u.s. and canadian production from 2008 to 2020, over that 12-year period to grow by more than 40 billion barrels per day. that's the potential. it's significant specific we've seen peek demand. we deblooe demand fo -- imports in 2020 are likely to be well below what they were as they were in 2005. have you seen the price of oil was $20 in 2020? given the demand supply trends, the import bill for oil could be about $182 billion less than what it would otherwise be. that $182 billion is about one third of the 2011 trade deficit. this increases in u.s.

production and canadian production are not guaranteed. impacts on local communitiesnd the environment obviously need to be address appropriately. there are new questions that have been raised about the face of growth in the canadian oil stand, w important part of of this continental growth story. but the potential is significant. if it were to be realized and spread to other places around the world, it would be a -- there's a tug of war right now between slowing global economic growth and geopolitical concerns. oil demand concern is weak, the global economy has slowed over the last year, which would seem to be a recipe for lower prices yet prices are high. why is that? limited spare capacity and geo political concerns. the oil market's shock absorber

is write lowe. we estimate it's and 2 to 2.5 billion per day. so it is significantly less. in 2012 the nur annian -- the tighter u.s. financial sanctions and embargo on -- mis calculations could dead to grave consequences. it's the supply anxiety which is a key support for high prices amid weak economic and oil demand growth.

assessing the course of the market is a challenge. if the euro. >> the zone were to worsen, we can't rule out a recession this year. any oil market outlook faces uncertainties but in 2012 the uncertainties are perhaps broader than usual and fraught with risk. however, the great retrifle in u.s. oil production and gas production are sources of growth and secure production at a time of heightened anxiety. thank you. >> thank you very much. mr. dawin, thank you for being here. go right ahead. >> good morning. it's an honor to speak to you. i will focus on what is happening in the united states. the way i'm looking at the oil market and the way to summarize

what the panelists before me said is really we have a bipolar crude oil market where we have significant down side risk because of the economic conditions in europe and on the other side we have significant up side risk because of tensions with iran and the possibility to lose some supply from this market. and the implication of losing barrels from the persian gulf. >> if you look at forward looking balance, we will see acute market tightening experienced in 2011 is not likely to be in store in 2012. demand is underperforming. we believe will be smaller whan what the iae believe, probably below a million barrel per day

with significant down side. when we look at oil demand globally, all the growth is decelerate, particularly in asia it's decelerating and growth is only focused on three regions in the middle east, latin america and emerging area. the bulk of the near term weaknesses in europe and also in the united states where we have significant be structural trends of declining demand. on the supply side we had a very disappointing year last year because we had obviously the problems in libya but also a number of problems during the summer, which we all believe are not recurring so 2012 will see a recovery of a lot of these supply and new project come online, mostly from the u.s., canada and russia. we don't believe actually brazil will be able to lot a barrels this year.

there is one uncertainty we haven't talked about, which is iraq. baghdad maintains an optimistic growth on iran for 2012. in our review the iraqi government forecast is overoptimistic given the security condition on the ground. we also have to remember we're chase country last two small countries in the recent months from production, recently sudan and syria a couple months ago. we might still have problems in libya and nigeria. they're not solved. so the supply risks are still abundant, even if we still believe we have have a million barrel a day of growth from non-opec crude and lk wid and opec liquids. we also need to talk about irannd the impact sanctions. with when we look at the potential countries that iran

could divert its european supply to, we don't see a lot of them. and we don't see a lot of countries willing to be more reliant on iranian barrels. so will's a good chance by the end of the year if the eu move the iran will have to shut down 400,000, 500,000 a day that need to be produced by other producers. forcing opec to reproduce more, reducing the spare capacity, which is not very large to start with. that would make oil and market pretty nervous. finally, from the u.s. perspective, the development of oil production and decline in oil demand mean security and reliability of supplies rising. last year i was asked where do i believe the best place continue to vest? answered answered to many of you were surprised to it's the united states. and we see that now where we have the full revolution, if you

want, in gas being translated to oil. we believe by 2020 the united states will become again the largest producer of hydrocarbon in the world, surpassing russia. and what we have seen between 2004 and 2008 in the u.s. gas market, the increase in prices has allowed the industry to crack the code and release a new golden era in the new goebbels oil. . we need to think about that what you look at investment globally right now in the last three years the u.s. has been the key area of investment flows. if you look at the last ten years, producers in the united states used to make profit here and invest abroad because they didn't believe that they can make sustainable reinvestment in the united states. what we see right now is slabtly

the the contrary the oil and gas industry is making profits all oft world and investing in the united states. that's a huge change in the industry. thank you. >> thank you very much. senator manchen, did you have a question you wanted to ask? i was told you had to leave. >> thank you. why don't you go ahead. >> thank you all for coming here. i'll get right to the point. it's the xl pipeline. i'm going to ask all of you to comment. i have a hard time understanding why this has become a political football. makes so much common sense that you want to buy off of your friends and notion enemies. i also think in going down to where we're going to do is amount of jobs. i want to hear y'all's yes or no maybe comment. there should be jobs created in the united states by this building of the pipeline.

i understand that there's a difference between what the state department has done, the environmental versus the epa in conflict, our own government, if you will, is fighting among itself for whatever reasons. and next of all the ability that alberta and canadians are going to produce this no matter what. and if china becomes a player or asia becomes a player market taking this product if we don't, what it does to our security and security should be the most factor i think the main factor of what we should be concerned about. would i ask -- i think the question would i ask and, doctor, i'll start with you, if you would. do you believe the oil sands will be developed whether we buy it or not? >> thank you. at the prices we have in our long-term projections, the sands, tar sand, call them what

you will, would likely be developed whether or not we purchase. >> does everybody agree, ambassador, you agree they're going to develop the oil sands? >> i would agree with that. >> i'm sure that everybody else agrees with that, too. and i would assume that you all think that would be a job creator for america if we build it through into america? do you all agree that there will be jobs i'm sure to build a pipeline, right, so it would be a job producers for us? >> again, this goes a little bit beyond what eia does. >> i mean common sense. you're experts. common sense. it takes americans to build it right. ambassador? >> well, you'd have an initial spurt of construction jobs and then you'd have some jobs to operate the pipelines. i'm not sure what the numbers would be. i don't know that it would be a great percentage of increase in employment but there would be

some increase, viewer. >> yes, it would create jobs and i think a broader point here is the oil sands development in alberta. there are many american companies that are involved with-from-that so the person economy does benefit from further development of the oil sands as well. >> which company with benefit most? well, i think it's likely not to be billed is the case. it's very difficult to send that identity jowl side of the united states, to take if to the west coast and poise even bigger environment an concern. let me try to answer a little bit differently. i think what we're see hearing between the development of the oil sand and the united states -- >> i hate to rush you, i don't have much time. they only give me so much time here and i'm going to have o run. but you're saying you think they're going to be held captive and we're standing that the alberta province is already

meeting right now with china in order to develop this. >> correct. but it's -- from all the economics, if you look at it, this oil is most like will to come to the united states. we still capacity for the next four, five, six years to absorb in the present infrastructure of oil. >> i'm going to southern the n sourcing. we want to rebuild things in and i just talk about it west virginia has been a big player in marcelis and the cole and all the resources we've been blessed with. if that's been down dld graded to the point of the cost of what we would marv, do you see the supply having a big impact on pricing? again?